ERP SOFTWARE IMPLEMENTATION FAILURE ANALYSIS AND CAUSES
TOP ERP IMPLEMENTATION FAILURE FACTORS
There’s no shortage of headlines or analyst reports citing ERP implementation debacles and a chilling industry implementation failure rate. Analyst firm Gartner estimates that 55 percent to 75% of all projects fail to meet their objectives. Research firm Standish Group has been doing surveys on all types of IT projects since 1994. Their research, published under the title CHAOS, reveals some surprising facts. The CHAOS research and database shows a staggering 31.1 percent of projects being canceled before completion. The results also illustrate 52.7 percent of projects cost 189 percent of their original estimates. The cost of these failures and overruns are just the tip of the proverbial iceberg. The lost opportunity costs are not measurable, but could clearly exceed the out of pocket expenses. However, recognizing the repeated causes of failure permits understanding, preventative occurrence and proactive risk mitigation strategies.
- Failed cross-representation agreement on enterprise wide business processes. For a common information system to work across the organization, all users across the organization must adopt, adhere and support common work methods supported by the application. Any department or line of business which chooses not to conform, emphasize politics over process or engages in sub-optimization will become the weak link that will ultimately break the chain and render the enterprise-wide system ineffective.
- Lack of visible, vocal and meaningful executive sponsorship. While there aren’t many projects without executive sponsors anymore, there are plenty with ineffective executive sponsors. Executive sponsors cannot stand on the side lines merely watching the game. They must visibly, vocally and actively demonstrate leadership, commitment to the project and support of project team members at every possible point. They must quickly intervene to resolve obstacles and champion the projects forward movement.
- Lack of formal and disciplined project management. The implementation of a mission critical business system is not the time to figure out project management for the first time. Experienced project managers leverage their skills, their experience and a proven project management discipline in order to advance projects according to plan and toward predicted success.
- Project team turn-over of key staff. Losing an executive sponsor or project manager can delay a project’s progress. Losing these roles multiple times or substituting lost roles with less capable replacements can dramatically increase risk and wreck havoc on the project.
- Inability to identify and mitigate risks or remedy incidents which ultimately escalate. Project risks and red flags generally occur throughout the project, however, if the project manager or project team don’t recognize or act upon these issues until late in the project the obstacles often compound and become even more difficult to resolve.
- Insufficient training. Implementation project teams and external consultants are famous for short-changing user training. It’s also common that during cost cutting sessions, training is one of the first things to go. Don’t fall into these traps. Training is essential to leverage the system capabilities and realize the benefits. Training updates in at least short bursts are advised after each new version upgrade.
- Troubled user adoption. There are few system advocates with the release of a new information system and getting users to accept a new system can be a big challenge. Combine the normal anxiety associated with change along with an unfamiliarity for the new system and a nervousness from only completing a minimal training program and user fears can escalate if not proactively grounded. Not only do many users fear change in and of itself, but more often than not the new system hasn’t had the years of tuning to mature like the prior system so users sometimes feel as though they are initially taking a step backward. Proactive change management is the best tool to address user adoption challenges.
- Too much software customization. For many companies the ERP software is viewed as too rigid or restrictive. However, responding to a lack of perceived flexibility by customizing the software before fully investigating re-configuration options, business process work-arounds or an interim period of trial before committing to customization can violate the integrity of the software, delay project progress, lead to excessive costs and impose significant risk to project success.
- Project viewed as an “IT” project. Business system implementations should be spearheaded and driven by business leaders. While IT resources are clearly key participants, ERP systems should not be viewed as IT projects.
- While not a cause for project failure, dirty data is a common cause for project delays. Most organization’s do not schedule sufficient time for data cleaning and are not aware of their poor data quality until they retrieve that data for import into the new system. This is a delay that occurs near the beginning of the implementation project, often lies on a critical path and therefore often pushes back all other tasks for the remainder of the project.
EARLY WARNING SIGNALS
ERP software implementation failures do not occur without warning. Here is a list of red flags that can act as a wake-up call if recognized early.
- No milestones. Key implementation deliverables and milestones are needed to measure progress, identify stalls and ensure a smooth conclusion. A lack of checkpoints with periodic deliverables is a sign of future trouble.
- Missed milestone and deadlines. Project deadlines can slip for many reasons, such as staff turnover or unforeseen events. However, a team that repeatedly misses its deadlines exhibits a lack of discipline which dramatically increases project risk.
- Shifting priorities and specifications. Scope creep and shifting requirements will affect the project's timeframe, cost and risk.
- Infrequent or weak executive sponsorship. Employees take their cues from the leaders of the company. If the organization’s leaders haven’t demonstrated the project is a priority, it isn’t a priority and user adoption will be extremely difficult.
- Staff turnover. While some project team turnover may be unavoidable, repeated or constant turnover can cause doom for the project.
- Poor incident management and spotty reporting. Open issues which linger eventually escalate. The inability to recognize and resolve issues or an absence of management reporting tools almost guarantees that problems are not being reported or are not being communicated to the extended project team.
ERP Implementation Failures
erp failure, erp software, implementation failure, project management, scope, accounting software, on-demand, saas